When asked about their motivation for developing and executing a long-term financial plan, nearly half (45%) of single-parent respondents identified “saving for my kids’ education” as the top priority. This is six points higher than the figure for “traditional families” (39%), which Allianz identifies as married couples of the opposite gender with at least one child younger than 21 living at home. Other household structures examined by Allianz, i.e. “modern families,” prioritized children’s future education costs 26% of the time.
The study suggests this savings strategy is proving problematic for single parents, as more than three-quarters (76%) said that preparing for retirement and their child’s college expenses at the same time causes them a great deal or some amount of stress.
This response comes despite the fact that single parents indicate they are on a relatively stable financial footing and exhibit strong confidence in their financial planning skills, Allianz says. Single-parent family respondents in the study had an average annual household income of nearly $85,000—the study required a minimum of $50,000 for all cohorts—with an average of 6% of income coming from child support. Nearly two-thirds (64%) of those in the study receive no child support at all. Along with solid earnings, more than four in 10 (41%) single-parent families reported having excellent or above average knowledge regarding financial planning, compared with only a third of other modern families.
Yet, balancing retirement savings and college funding continues to be a complex issue for this group, Allianz researchers explain (see “Linking Student Debt and Retirement Savings”). Although more single parents identify themselves as savers (62%) than spenders (38%), more than three-quarters (76%) say they are worried about running out of money in retirement—compared with only 70% of traditional families. And less than half of single parents (45%) indicate they know exactly what steps to take to ensure they have a comfortable retirement. This compares with nearly six in 10 (57%) of traditional family respondents who believe they understand the steps necessary to ensure a comfortable retirement, according to the Allianz data.
Katie Libbe, a vice president of consumer insights for Allianz Life, explains that single parents are often forced to confront the retirement equation by themselves, which places pressure on their ability to find the right balance between saving for a child’s college expenses and saving for their own future income needs.
“Because they are on their own, single parents often lack the flexibility to address multiple goals, and therefore tend to have a more narrow focus on their savings priorities,” she adds.
Although single parent respondents seem willing to prioritize their children ahead of themselves, they also recognize that this can have negative repercussions. More single parents (37%) agree that they are putting their financial future at risk to take care of their children than other modern families (32%). As a result, nearly half (49%) of all single parents say they cannot possibly save enough for retirement, Allianz says.
Despite this, single parents remain dedicated to assisting their children either through college funding or getting them started financially. The study shows nearly half (45%) of single-parent families say it is a parent’s responsibility to help adult children get started financially, versus 37% of other modern families.
“While single parents have several options to help pay college expenses—including grants, scholarships, and student loans—they’re solely responsible for their own retirement savings,” Libbe says. “Depleting their nest egg to fund education costs can be dangerous. To avoid sacrificing retirement savings, a good plan may be to explore college saving and borrowing options first, then determine how those tactics fit with their larger savings strategy.”
Allianz published an earlier presentation of the LoveFamilyMoney study data, showing same-gender couples with children are emerging leaders when it comes to family financial stability and successful long-term planning. The data is also presented on the Allianz website.